Understanding Collagen Solutions plc’s (LON:COS) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Collagen Solutions is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. See our latest analysis for Collagen Solutions
Despite a decline, did COS underperform the long-term trend and the industry?COS is loss-making, with the most recent trailing twelve-month earnings of -UK£2.03m (from 30 September 2017), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -UK£1.55m. Each year, for the past five years COS has seen an annual increase in operating expense growth, outpacing revenue growth of 53.70%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Viewing growth from a sector-level, the UK biotechs industry has been growing its average earnings by double-digit 21.75% in the previous year, and 14.34% over the past five. This shows that whatever tailwind the industry is benefiting from, Collagen Solutions has not been able to reap as much as its average peer.
Although Collagen Solutions is loss-making, its has a good cash runway to meet its upcoming operating expense (should SG&A and one-year R&D remain constant at the current level of UK£5.04m) over the next year. This is a strong indication of good cash management.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will occur going forward, and when. The most useful step is to assess company-specific issues Collagen Solutions may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Collagen Solutions to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for COS’s future growth? Take a look at our free research report of analyst consensus for COS’s outlook.
- Financial Health: Is COS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.